Hong Kong stocks continue to advance with a pattern of significant rises and minor pullbacks｜Gu Tianhou

On February 13, it was mostly cloudy, cool in the morning and evening, with brief sunshine during the day. Inflationary pressures in the U.S. intensified in January, reducing the chances of a rate cut by the Federal Reserve and pushing U.S. bond yields upward, significantly pressuring U.S. stocks on Wednesday. The Dow opened sharply lower by 235 points, with the decline widening to a maximum of 489 points, hitting a low of 44,104, but the drop later narrowed, closing at 44,368, down 225 points or 0.5%; the S&P 500 fell 16 points or 0.27%, closing at 6,051; the Nasdaq rose 6 points or 0.03%, closing at 22,148.

In individual stock performance, Nvidia and Amazon saw their stock prices drop by 1.3% and 1.7%, respectively, while Tesla reversed a five-day decline, rising 2.4%. Apple increased by 1.8%, and AI application software company Palantir surged by 4.2%. Ride-hailing platform Lyft's first-quarter order forecast was disappointing, causing its stock price to plummet by 7.9%. Kraft Heinz's full-year earnings forecast was worse than expected, leading to a 3.3% drop in its stock price. Super Micro Computer (SMCI) issued an aggressive long-term revenue outlook, resulting in a 2.8% increase in its stock price. Boeing climbed 3.2%, making it the strongest performer among Dow components, while Caterpillar fell 2.8%, marking the largest decline among Dow components.

Egg Prices See Largest Increase Since 2015

The U.S. Department of Labor announced that the Consumer Price Index (CPI) rose by 3% year-on-year in January, higher than the expected 2.9%. The month-on-month increase accelerated from 0.4% in December to 0.5%, exceeding the expected 0.3%. The core CPI, excluding food and energy, rose by 3.3% year-on-year, up from 3.2% in December, surpassing the expected 3.1%, and increased by 0.4% month-on-month, higher than the expected 0.3%.

Additionally, the real average weekly earnings rose by 0.7% year-on-year in January, but fell by 0.3% month-on-month. Last month's prices saw egg prices soar over 15%, marking the largest increase since 2015, accounting for about two-thirds of the grocery price increase. Hotel accommodation and used car prices also rose, possibly reflecting the impact of wildfires in Los Angeles; excluding housing and energy, service prices rose by 0.8%, the fastest growth in a year.

Next Rate Cut Expected to be Delayed Until December

Following the data release, the U.S. 10-year bond yield briefly rose by 12.4 basis points to 4.661%. The 2-year bond yield, which is more sensitive to interest rates, also increased by 9.89 basis points to 4.3822%. Market expectations for a rate cut by the Federal Reserve have cooled, with traders now betting that the next rate cut will be pushed back from September this year to December. Whitney Watson, Co-Head of Global Fixed Income at Goldman Sachs Asset Management, stated that the latest CPI data reinforces the Federal Reserve's cautious stance on easing policies, and it is believed they will continue to adopt a wait-and-see approach, expecting no changes at next month's meeting. However, Trump has again taken to social media platform Social Truth, stating that interest rates should be lowered, in conjunction with the upcoming imposition of tariffs However, former U.S. Treasury Secretary Summers warned on Bloomberg TV on Tuesday that U.S. inflation is facing the biggest outbreak risk since 2021, believing that the current rate-cutting cycle has ended. He pointed out that last week's wage increase data indicates a tightening job market, and the next policy change by the Federal Reserve could be an interest rate hike. The U.S. dollar index briefly rose 0.52% to 108.523, before fluctuating and softening.

Investors' Attitude Towards China Has Changed

As for the continuous rise of Hong Kong stocks, the Hang Seng Index opened 231 points higher yesterday and continued to rise, ultimately closing near the day's high at 21,857 points, up 536 points or 2.64%, with a turnover of HKD 287.1 billion. Northbound capital, which had net outflows on Tuesday, returned to buying, recording a net inflow of HKD 7.5 billion. Since the launch of DeepSeek, funds have been chasing AI-related stocks, leading to a revaluation of Hong Kong and China tech stocks. Recent signs also indicate that global investors are showing interest in Chinese hedge funds, with 7% of investors increasing their allocations to funds investing in China. Many investors are re-evaluating their investments in China, and their attitudes have changed, potentially driving more long-term fundamental investments rather than relying solely on the "speculative market" caused by stimulus policies.

As global capital remains underweight in the Hong Kong and China stock markets, it is expected that the AI hype could last for an entire year. However, the outbreak of trade wars and the current state of U.S.-China relations remain the biggest black swan events. The Golden Dragon Index, which reflects the performance of Chinese concept stocks, rose another 2.73% overnight, driving Hong Kong stocks higher in night trading and ADRs, both breaking through the 22,000 mark. This morning, the black futures also stabilized above the 22,000 mark, and it is expected that the Hang Seng Index will open 200 points higher, with the market potentially filling part or all of the gap during the day, which remains to be observed. Currently, Hong Kong stocks are still strong, temporarily advancing in a pattern of significant rises and minor pullbacks.

Gu Tianhou

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